Counsel’s Corner: Mortgage Professionals Lining Up for Defense Against TCPA

David Biderman

David Biderman, a partner in Perkins Coie's San Francisco and Los Angeles offices, focuses his practice on mass tort litigation and consumer class actions. He heads the firm's Mass Tort/Toxic Tort Defense group. He has represented a wide variety of companies in state and federal courts in California for 30 years. Biderman recently talked with DS News about the Telephone Consumer Protection Act (TCPA) and its effect on the mortgage industry.

What is the purpose of the TCPA?

The Telephone Consumer Protection Act was designed to prevent harassing phone calls. It basically says it’s unlawful to make cell phone calls using an automatic telephone dialing system without the consent of the recipient. It’s a federal statute, and violations can result in penalties of $500 to $1,500 per call.

At one time, the TCPA was not a significant issue for people in lending, but now it is, basically due to a variety of decisions by the Federal Communications Commission. Their definition of an autodialer has expanded so enormously that now it includes any phone that’s capable of making any kind of automatic dialing, or any phone that you can program a number in it to dial. The phone that is on your desk would probably be classified as an autodialer under the expanded definition. That has made it difficult, because it was originally designed to cover mass dialing machines, but now it covers virtually any telephone.

There is also the FCC rule that stated before you could make a phone call to someone with a cell phone, you needed written consent in advance. You couldn’t get it during the phone call, and it had to be written—it could not be verbal. Then, to cap things off, about two months ago, the FCC issued an opinion that the consumer could revoke the consent verbally, so there was no written documentation needed that that any consent was revoked. If you’re involved in the business of collecting loans, knowing that you’re recording every call, which now everyone does, now you’re going to have a really hard time demonstrating that the consumer did not revoke the consent. Obviously the consumer is going to say they revoked the consent.

The other thing is that unlike a lot of the other statutes that apply to lenders, for example, the Fair Debt Collection Practices Act, which have caps as to how much can be collected in damages, there is no cap of the liability under the TCPA. You think about how many dollars per phone call and how many phone calls can be made and there has been some really significant settlements in the past couple of years, many involving financial institutions. Accordingly, there has been a big increase in the number of filings. If you’re a lender, you have to be very careful about a) getting the written consent and making sure you’ve documented the written consent, and b) making sure you document every call so that someone can’t say they verbally revoked the consent, because that’s the issue that really caused the problem. You have borrowers who say, “Listen, I revoked the consent.” Unless you’ve got a recording of the phone call, it’s difficult to prove that didn’t happen. All of these cases are brought as class action in tandem with some other statute, like the Fair Debt Collection Practices Act, and it’s created significant exposure for lenders. It’s sort of the lawsuit du jour for consumer plaintiff’s counsel, both against regular retailers, etc., that make phone calls, and more recently and more frequently, against lender defendants.

Since it’s difficult for the lender to prove that the oral revocation didn’t happen, doesn’t that work both ways if there’s no recording of the phone call? Wouldn’t it be difficult for the consumer to prove that it did happen? Or does the consumer get the benefit of the doubt?

What it does prevent is, it prevents you from getting summary judgment. So you can’t get the case knocked out without a trial. It would then go to a jury or a judge to decide whether or not that consent was revoked, and a) the consumer may get the benefit of the doubt, depending on the judge or jury you have, and b) most of these cases are brought as class actions, and if the class is certified—if the court says these suits can be brought on behalf of all borrowers who received phone calls to their cell phones where they had revoked consent, it can be a pretty big class. So the exposure to the lender is very significant, and if you can’t get out on summary judgment, you’re faced with the choice of settling or taking the case to trial. That’s the issue. You like to try to be able to knock these cases out on the pleadings or in some sort of preliminary stage, such as on a motion to dismiss or a motion of summary judgment, before it actually goes to the stage where it starts to reach a jury. Because at that point, it’s a coin flip, with one side saying one thing happened and the other side saying something else happened. That’s why it’s so important to document these calls.

Do you think we’re going to see more of these types of lawsuits, or are mortgage industry professionals going to start covering themselves better so that this type of thing doesn’t happen?

I think these suits are going to continue along, because there’s the statute of limitation is two to four years. You’ve got some situations where the FCC said the consent can be revoked verbally, and they just made that determination a month or two ago, so you’ve got companies that didn’t have procedures in place for making sure they documented there was no verbal revocation. But I think in the future, every lender, and every company that does business with a borrower by phone where there is going to be a call to a cell phone, is going to have to institute rigorous procedures to make sure that each phone call is recorded. You’ve got some sort of documentation as to what transpired. You also need, in advance, in the lending documents or some other form right at the outset, written permission from the consumer that you can make the calls in the first place. So you have to do two things: one, you have to get the written permission, and then two, you need to make sure that you can demonstrate there hasn’t been a verbal revocation. But I know that lenders are putting the appropriate procedures in place so that these lawsuits won’t be brought in the future, or if they are brought, the lender can demonstrate they’re without basis. There is also a legacy period where FCC rulings were not as clear and some of the lenders may not have had all the procedures buttoned down.

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.